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Defaulting on a business loan has a negative impact on your credit score and impacts future loan eligibilities. You will become a ‘bad risk’ and will have difficulty in getting future loans or credits. Even if you get one, the rate of interest and other charges will be very high.

Here are the other consequences of defaulting on a Business Loan: 

  • Your Credit Score Drops – Credit bureaus keenly watch your repayment history to determine your credit score. Any defaults on your payment will affect your credit score negatively.
  • Difficulty in getting future loans and credit – With lower credit scores, it will become difficult for you to get loans from lenders. There is a high chance of your applications getting rejected.
  • Increased rate of interest with lower loan amount – Another impact of default is unfavourable loan terms. Though you may get loans, the interest rate will be pretty high and you may not get the loan amount that you require.
  • Legal Action – Since a loan is a legal agreement, the lender is allowed to initiate legal action against you for defaulting on payments.
  • Bankruptcy Filing – In a worst-case scenario, if you are unable to repay the loan, you will have to file for bankruptcy.


We take loans with the full intention of repaying them. However, unexpected risks and bad decision making may result in business failure leading to defaulting on loan payments. Debt management is a serious process and requires financial management skills and investment expertise to keeping you out of bad debt.

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